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Issues Involved:
1. Validity of proceedings initiated under section 34(1)(a) of the Indian Income-tax Act, 1922. 2. Jurisdiction of the Income-tax Officer in initiating reassessment proceedings. 3. Requirement of full and true disclosure of material facts by the assessee. Issue-wise Detailed Analysis: 1. Validity of proceedings initiated under section 34(1)(a) of the Indian Income-tax Act, 1922: The core issue was whether the proceedings under section 34(1)(a) were initiated in accordance with law. The Tribunal held that the initiation of the proceedings was invalid, as the material facts regarding the sum of Rs. 24,800 were already within the knowledge of the Income-tax Officer before the completion of the original assessment. The Tribunal found that the Income-tax Officer had made inquiries about the sum before the original assessment, indicating no suppression or omission by the assessee. The High Court upheld this view, emphasizing that the primary facts necessary for assessment were already known to the Income-tax Officer, thus invalidating the reassessment proceedings. 2. Jurisdiction of the Income-tax Officer in initiating reassessment proceedings: The Tribunal and the High Court scrutinized whether the Income-tax Officer had jurisdiction to initiate reassessment proceedings under section 34(1)(a). The Tribunal concluded that the officer lacked jurisdiction as the facts about the Rs. 24,800 were already known to him. The High Court agreed, stating that for jurisdiction under section 34(1)(a), the officer must have reason to believe that income had been under-assessed due to the assessee's failure to disclose material facts. Since the officer already knew the facts, the second condition for jurisdiction was not met. 3. Requirement of full and true disclosure of material facts by the assessee: The High Court examined whether the assessee had failed to disclose fully and truly all material facts necessary for assessment. The department argued that the assessee's denial of the discovery of Rs. 24,800 constituted a failure to disclose material facts. However, the High Court found this unpersuasive, noting that the Income-tax Officer already possessed all necessary facts before the original assessment. The court cited Supreme Court precedents, which held that once primary facts are known to the assessing authority, no further disclosure is required from the assessee. Conclusion: The High Court concluded that the proceedings under section 34(1)(a) were not initiated in accordance with law, as the Income-tax Officer already had all necessary facts before the original assessment. The court answered the referred question in the negative, favoring the assessee and against the department, and made no order as to costs.
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